September 25, 2015 11:22 AM
The World Bank is considering changing its definition of what constitutes extreme poverty, raising the level below which someone is treated as extremely poor from $1.25 a day to $1.90 a day. This comes after a long trend of people moving out of the category, leading some to point out that the Bank may have an interest in maintaining high numbers of people defined as poor.
September 24, 2015 10:57 AM
OPIC is the Overseas Private Investment Corporation. It is a federal agency that offers financing for international projects by U.S. companies. Intended mainly as an economic development tool for developing countries, OPIC is also a way to give assistance to U.S. companies, and serves as a foreign policy tool for the federal government. In recent years, OPIC has also been captured by renewable energy interests, who now receive roughly 40 percent of its business.
September 18, 2015 6:31 AM
Earlier this week, I wrote that GE is moving 500 jobs overseas as a direct result of the Export-Import Bank’s expiration. A correction is in order—from GE, not from me.
As it turns out, 400 of those jobs did not exist in the first place. Multiple sources confirm this.
The Washington Post’s Catherine Ho:
Those 400 jobs do not currently exist, but that is the number of jobs GE would create in France if it wins pending deals that Coface has agreed to help finance.
The Heritage Foundation’s Diane Katz:
Contrary to the hyper headlines, the 400 jobs that Greenville supposedly will “lose” don’t even exist.
The Mercatus Center at George Mason University’s Veronique de Rugy:
G.E. doesn’t always make such noise about “moving jobs abroad.” After all, it already has a large workforce overseas. Should Americans be upset about those jobs, too?
In particular, Veronique’s entire post is worth reading, and makes several other important points. As for the 100 jobs that apparently are moving overseas: rather than one sixth of one percent of GE’s workforce moving overseas, the corrected figure is closer to one thirtieth of one percent. One might as well put a GE logo next to the dictionary definition of “hyperbole.”
September 16, 2015 12:53 PM
General Electric recently announced it would not move its headquarters to Cincinnati. The reason for this earth-shattering news is that some members of Ohio’s congressional delegation oppose reauthorizing the Export-Import Bank. GE is a major beneficiary of Ex-Im financing.
The announcement costs GE nothing to make, as the top contenders for relocation apparently include New York and Georgia. It expects to reach a decision by year’s end. GE, currently headquartered in Connecticut, is mulling a move as it sells off most of GE Capital, its financing arm. Connecticut’s high taxes and unfavorable business climate are also factors in GE’s relocation decision, though apparently GE only pays the state minimum in corporate tax--$250 (GE and its employees pay plenty of other taxes, though). Most of GE’s Connecticut employees work for GE Capital, whereas most of its other operations are elsewhere—including, ironically, Ohio.
GE also announced that, because of Ex-Im’s uncertain future, it is moving 500 jobs overseas. Then again, this isn’t exactly big news, either. GE has roughly 307,000 employees, so this is equivalent to about one sixth of one percent of its workforce. GE’s natural turnover from retirements, hirings, and firings is orders of magnitude higher. Also worth pointing out: about 55 percent of GE’s employees are already overseas.
September 11, 2015 2:39 PM
A new report commissioned by the International Alliance for Electronic Payments, of which CEI is a member, finds that the Reserve Bank of Australia misunderstood the economics when it first moved to cap interchange fees on electronic card payment systems. That cap was mimicked in the U.S. via the Durbin Amendment in the Dodd-Frank Act and more recently when the European Union decided to impose its own caps.
The new report, written by Professors Sinclair Davidson and Jason Potts of RMIT University, finds that the Reserve Bank mistook an efficient, interdependent system for a monopoly. They write:
In short, the Reserve Bank of Australia engaged in an extensive regulatory intervention based on poor theory, and no empirical evidence. Theory has not provided an unambiguous indication of market failure, and there is no empirical evidence to support the notion of monopoly pricing – other than a vague notion that interchange fees were “excessive”. What the Reserve Bank identified as being “externality” any fair minded observer would label “gains from trade”.
We argue that interchange fees are the outcome of an efficient bargaining process given that banks and consumers, and banks and merchants form long term relationships with each other. For as long as there is competition in the banking sector and competition in the retail sector, the interchange fee itself is subject to competitive pressure.
They also conclude that Australian consumers are likely to be worse off as a result of the regulation. That conclusion is echoed in the empirical research into the effects of the Durbin Amendment in the U.S., with several studies suggesting significant impacts on consumer welfare.
August 13, 2015 1:16 PM
Trade negotiators from 12 countries left Maui at the end of July 2015 without reaching a final agreement on the Trans-Pacific Partnership (TPP), a massive trade pact among countries that represent about 40 percent of the world economy. The 12 countries negotiating TPP are the United States, Japan, Mexico, Canada, Australia, Malaysia, Chile, Singapore, Peru, Vietnam, New Zealand, and Brunei Darussalam.
Stymying further progress on the agreement are several tough issues that won’t be easy to reconcile as several countries dig in to protect certain sectors of their economies. Further complicating negotiations are up-coming October elections in Canada and the desire on the part of the U.S. to finalize the deal before 2016 presidential election campaigns go into high gear.
It’s ironic that this deal—portrayed as an agreement to open important Pacific Rim markets—is being held up by traditional protectionist tactics as countries seek to protect key industries.
One of the thorny issues for the U.S. and New Zealand is Canada’s supply management program for dairy products, poultry and eggs. Besides trying to balance domestic production with domestic demand and providing price supports, Canada’s program imposes quotas on dairy imports and stiff tariffs over those quotas. For example, tariffs on butter can be as high as 299 percent.
New Zealand and the U.S. would like TPP to provide better access to that Canadian dairy market. As a small country, New Zealand is nonetheless a major dairy exporter, and dairy products account for about 30 percent of New Zealand’s merchandise trade exports. But with Canada’s Prime Minister Stephen Harper facing what could be a tight reelection, Canadian negotiators might be reluctant to alienate the domestic dairy industry. On the other hand, Harper does want the trade deal and may have to compromise to reach that goal, as New Zealand had been adamant in holding to its position.
August 10, 2015 1:20 PM
Today, CEI and other members of the International Alliance for Electronic Payments joined the Australian Taxpayers Alliance in submitting evidence to an Australian Senate inquiry into credit card interest rates and related matters. CEI has long been concerned about the effects of regulation on the payments card industry and helped found the International Alliance in order to help ward off these harmful effects all over the world.
July 27, 2015 1:45 PM
Rep. Carolyn Maloney supports reauthorizing the Export-Import Bank, whose charter lapsed on June 30. She recently took to the Huffington Post to give 10 reasons to support Ex-Im. Here’s reason 1:
Exports play an important role in the U.S. economy, supporting nearly 12 million jobs in 2014.
Ex-Im did about $27.5 billion worth of business last year, amounting to about 1.2 percent of America’s $2.35 trillion in total 2014 exports, and less than one-sixth of one percent of America’s $17.7 trillion 2014 GDP. From this, Rep. Maloney concludes that Ex-Im supports nearly a tenth of the entire U.S. workforce!
Also note the clever use of phrasing here. Rep. Maloney and other Ex-Im supporters always talk about jobs “supported,” and never jobs “created” or “saved.” This is on purpose. Such phrasing is vague enough to make Ex-Im look good without having to prove that it’s actually doing good. This is important, since every time Ex-Im helps Boeing sell a jet to a foreign airline, it hurts domestic airlines and eliminates jobs there. I am not aware of any official Ex-Im statistics on how many jobs the agency has un-supported.
Reason 5 is similar, and reads in part:
Since 2009, our Ex-Im Bank has supported an estimated 1.3 million jobs.
That averages out to 260,000 jobs supported per year (again, note the phrasing), or about one-sixth of one percent of the total year-end 2014 labor force, according to the Bureau of Labor Statistics. Since Ex-Im’s annual support is equivalent to only $2,300 per job supported, most of those jobs would still exist without Ex-Im—in fact, since Ex-Im is largely redundant with private sector financing, its actual amount of net support created is far smaller than even its own meager statistics show. Factor in the jobs Ex-Im unsupports, and Ex-Im is almost certainly a net drag on the U.S. economy.
Rep. Maloney’s other reasons are of similar strength.
July 15, 2015 10:46 AM
Two weeks ago, the Export-Import Bank’s authorization lapsed. The agency remains open, but is not allowed to consider new loans or other projects. It may only maintain its existing portfolio, which will wind down over a period of several years.
In an op-ed over at Inside Sources, I take a look at what’s next for Ex-Im:
Rarely does a federal agency shut its doors — the Civil Aeronautics Board closed in 1985, and the Interstate Commerce Commission followed suit in 1995, but that’s about it. Twenty years later, will Ex-Im add its name to this short list? What will happen then? Should the agency be revived?
The short answers are that nobody knows if it will actually close, not much will happen in the short run either way, and the agency should not be revived.
In the time since I wrote the piece, it’s begun to look like Ex-Im reauthorization may be folded into the highway bill extension Congress will consider later this month, but nothing is concrete yet.
Read the whole thing here.
July 1, 2015 3:25 PM
A Review of the Poverty Cure Documentary Series
Poverty Cure is a six part documentary series directed and hosted by Michael Matheson Miller, produced by Acton Media, and was released on December 5, 2014. The film is a project of Poverty Cure, a Christian-based organization that puts together a network of institutions in an effort to defeat poverty through the means of capitalism and entrepreneurship.
This documentary series is primarily targeted at Christians who are presumably active in their faith-based communities. It proposes that Judeo-Christian values can serve as a beneficial moral code for entrepreneurs and businessmen. The series argues that this moral code will guide and serve as the means for businessmen to run companies effectively to serve the impoverished by providing them work and a place to start businesses of their own.
The Christian values are reiterated throughout the entire series, and at times the rhetoric distracts from the series’ main argument. However, once the viewer is aware of the organization’s values and their target audience, the Judeo-Christian language seems more reasonable.
That aside, the series argues its case successfully, convincing at least this viewer that the developing world does not need charity, foreign aid, or philanthropy. Further, it demonstrates that developing countries and poverty-stricken populations require a free market society, open trade, and accessible investment opportunities.
From the start, the series does well to discredit celebrity campaigns that “combat poverty,” massive foreign aid campaigns, and substantial corporate donations, which is also known as “dumping.” We see that these actions cripple local economies of developing nations. The series uses the example of a Rwandan farmer who provides his local market and community with eggs. When an aid campaign group decided that they were going to continually donate eggs to the village, they effectively drove the farmer out of business. The community then became dependent on egg donations. Consequently, when the aid campaign stopped donating eggs, the community was unable to react to the change and was forced to import eggs from another region. While the intentions may be good, they can actually cause local businesses to lose their customers, subsequently crippling the local economy by stagnating or even reversing business growth.
The series admits, correctly so, that people start these campaigns because they have good hearts and good intentions; they want to end suffering in the world and help those who are impoverished, so they think the easiest thing to do is donate goods and services to these people. However, Poverty Cure makes it evident that these strategies do not work, and can actually do more harm to the community.